From Sea to Sale
Alaska’s seafood supply chain depends on processing, freezers, and logistics
Alaska seafood takes many different paths to market, but one of the most common paths involves removing fish heads and guts, freezing the fish, and shipping it out of state.
Headed and gutted fish is the single largest category of seafood product produced by Alaska’s fish processors, outstripping more value-added products like fillets, canned fish, and prepared seafood products. Much of the headed and gutted fish is ultimately bound for US markets—but it first travels across the Pacific for secondary processing done mostly in China.
Today’s seafood supply chain gets Alaska seafood to consumers at low cost. Modern freezing methods help lock in taste and nutrients to ensure a positive experience for consumers, even after the highly perishable product has traveled long distances in cargo ships. But like Alaska’s oil industry, Alaska’s seafood industry supply chain moves most of the state’s seafood out of state as an unrefined product, creating a persistent challenge for fishing communities that seek to keep more value and more Alaska fisheries jobs in state.
Dominance of the Head-and-Gut Export Model
Across fishery types, whole fish and headed and gutted fish made up 41 percent of the first wholesale value of Alaska seafood products in 2017-2018, according to the 2020 Economic Value of Alaska’s Seafood Industry report prepared by McDowell Group.
Fillets were the second most valuable wholesale seafood product at 20 percent, followed by surimi at 13 percent. Surimi is ground fish paste, usually made from Alaska pollock, used to make imitation crab meat, among other products.
The proportion of product types doesn’t change much year-to-year, but there is considerable variation between different fisheries, says Dan Lesh, a senior analyst at McDowell Group who worked on the 2020 report.
One of the biggest changes has come in the salmon fishery where freezing has largely replaced canning. Canning only stopped being a major commercial method for preserving Alaska salmon fairly recently. In 2007 freezing overtook canning as the main method of processing pink salmon, the most frequently canned salmon among Alaska’s five salmon species. In 2019, only about a third of Alaska’s pink salmon was canned, according to Commercial Operator’s Annual Reports data from the Alaska Department of Fish and Game. The proportion of canned salmon is considerably smaller for Alaska’s other salmon species.
Some Alaska salmon is processed into fillets before freezing, but most is frozen whole after being headed and gutted, says Lesh.
Pollock, the groundfish that produces more seafood by weight than any other fish in the United States, tends to undergo more processing within Alaska compared to most other fish, says Lesh. Most pollock fished in Alaska is sold wholesale as either surimi or fillets. But cod—the second most fished groundfish in Alaska—doesn’t follow the same pattern as pollock. Like salmon, most cod leaves Alaska headed, gutted, and frozen.
Finding Value at the Start of the Supply Chain
For Alaska salmon fishermen, the move from canned salmon to frozen salmon created an opportunity to receive a higher price for their catch, provided they can invest in technology to keep their boats cool.
Freshness and quality matter more for frozen salmon than for canned salmon, and processors are willing to pay a premium for fish that arrives at the dock cold.
As Executive Director Andy Wink at the Bristol Bay Regional Seafood Development Association (BBRSDA) puts it, “The product used to wear a parka to the market, and now it wears a birthday suit.”
That’s why the BBRSDA has been helping Bristol Bay fishermen invest in technologies to start chilling salmon onboard the vessel that catches it. Bristol Bay fishermen chill most fish by installing refrigerated seawater systems that pump cold water into fishing vessel holds.
Processors started to prioritize chilled salmon about fifteen years ago, paying bonuses of $0.15 to $0.25 per pound of fish, says Wink. This is a significant incentive for fishermen who are paid a base price of about $1 per pound for sockeye salmon.
Fishermen have been quick to take advantage of chilled salmon bonuses and have been further spurred to adopt chilling technology as some fish processors now require chilled fish. Between 2009 and 2018, chilled salmon increased from 16 percent to 84 percent of the Bristol Bay drift net salmon catch, according to a BBRSDA-commissioned survey published in April.
Copper River Seafoods Adds Value in Alaska
Like most other processors, Anchorage-based Copper River Seafoods does basic heading, gutting, and freezing operations at its port processing facilities.
But unlike most of the industry in Alaska, the company also does much of its secondary processing in Alaska. Fish travel from the company’s Cordova, Kenai, Kotzebue, Naknek, and Togiak fishing ports to the company’s plant in Anchorage’s Mountain View neighborhood for further cutting and packaging. About 60 percent of the company’s seafood passes through the Anchorage value-added plant, says Jim Kostka, the company’s marketing director.
Kostka describes Copper River Seafoods as the only Alaskan-owned seafood company among the state’s eight largest seafood processors. Being an Alaskan-owned company that does its secondary processing in-state puts the company in a niche that customers seek out, he says.
“We know that we are at an economic disadvantage if you simply compare something like the cost of processing,” he says. “By processing the harvest locally, we believe that we provide a superior product, and our customers seem to agree based on their continued loyalty and support.”
In addition to processing fish for grocery and warehouse store chains, Copper River Seafoods’ plant in Anchorage also makes custom seafood cuts for restaurants. Or at least it did before COVID-19 forced the closure of many restaurants across the country.
Like many food suppliers, Copper River Seafoods had to suddenly find a market this spring for food that would normally go to restaurants. The business responded by expanding its direct-to-consumer seafood sales, both online and at an Anchorage pop-up market. Direct-to-consumer seafood sales grew from 10 percent to nearly 20 percent of Copper River’s business over the course of a few months. It’s too soon to know if direct-to-consumer sales will continue to be a larger revenue source, Kostka says.
“It usually takes about sixty days for habits to form—good or bad—and it seems like it hasn’t slowed down even with the Lower 48 starting to come back online,” he says. “We’ll see if it’s a flash in the pan.”
Workers unloading salmon during the 2020 Copper River opener in Cordova.
Fresh Seafood and the Chain of Custody
Fresh Alaska seafood is a small piece of the seafood market compared to the frozen market. Fresh products make up about 6 percent of the market by value.
But fresh seafood products can be an important ambassador for the Alaska seafood brand. Early each summer, Alaska Airlines celebrates the arrival of fresh Copper River king salmon with a highly publicized flight from Cordova to Seattle. The 2019 flight carried more than 20,000 pounds of salmon in a jet painted like a chinook and known as the Salmon Thirty Salmon II.
This annual flight is met with fanfare, but it is by no means the only Alaska Airlines 737 filled with fresh seafood. The airline frequently carries planeloads of Alaska seafood, most commonly salmon, halibut, cod, and shellfish, says Shannon Stevens, the company’s regional cargo sales manager. Fresh Alaska seafood now flies through the express Goldstreak services, the cargo equivalent of first class
“Alaska Airlines has always been in the seafood business; however, over time, the product has changed from a frozen backhaul commodity to a fresh, time-sensitive, high demand product,” she says.
Of course, fresh seafood only helps the Alaska seafood brand if it arrives at its destination tasting fresh.
To maintain the reputation of the company’s seafood, Copper River Seafoods retains ownership of its seafood products until they have arrived at their destination and have been inspected and found to be the correct temperature, says Kostka.
“Nobody wins if you have a substandard product served as quality on a high-end dinner plate,” he says. “Until the last minute, we’ll hold that chain of custody.”
Improvements in electronic shipment tracking over the past several years have made it easier to track products to their destination, he says. Today it’s possible to get an Arctic Keta salmon (also known as a chum salmon) from the Bering Sea to Anchorage to a dinner plate at a Paris restaurant in less than 24 hours.
But while it’s possible to transport a fresh fish across the world, today’s freezing technologies make it possible to deliver a frozen fish that tastes just as fresh without needing time-sensitive plane connections, Kostka says.
Alaska Seafood and the China Trade War
The trade war between China and the United States has hurt Alaska’s seafood industry both by making Alaska seafood less competitive to Chinese consumers and by adding costs in the secondary processing supply chain. The trade war continues to affect the Alaska seafood industry despite the Phase I trade deal reached between the two countries in January.
About two-thirds of Alaska’s seafood is exported. China remains the largest buyer of Alaska seafood, even with recent import reductions attributed to the trade war. China’s neighbors Japan and South Korea are the next largest Alaska seafood buyers.
China is both a final market and an intermediate market for Alaska seafood. The Chinese tariffs on US imports are supposed to only target seafood that’s being consumed in China, but in practice, the trade war also affects the secondary processing business in China. That’s because Alaska seafood products that are processed in China are subject to US tariffs when they are re-imported into the United States.
China has a large consumer market for seafood that has imported more and more seafood over the course of the trade war. But the US seafood industry hasn’t been able to take advantage of the growing market. US seafood exports to China decreased 10 percent in value last year.
“Following the tariff increases in 2018 and 2019, the US lost market share while China’s total seafood imports nearly doubled,” says Ashley Heimbigner, communications director at the Alaska Seafood Marketing Institute, Alaska’s official state seafood marketing arm.
Chinese tariffs on most Alaska seafood products—including frozen finfish, roe, and many types of shellfish—currently sit at between 32 percent and 40 percent, she says.
The trade war started in 2018 and showed some signs of easing in January with the signing of Phase 1 of a trade agreement; however, Phase I doesn’t include any immediate tariff reductions for Alaska seafood, says Heimbigner.
The deal does have a mechanism that can allow the import of Alaska products without the higher tariffs on a case-by-case basis.
“Currently, Alaska’s Chinese customers can apply for an exclusion as part of the Phase 1 trade deal, and if granted, can import an approved quota of Alaska seafood that is not subject to the additional tariffs,” Heimbigner says.
“While this is not an ideal situation, it has allowed limited access for Alaska seafood to the massive China market.”
Sockeye salmon on a Copper River Seafoods processing line in June 2020. Salmon are first headed and gutted. Many of the company’s products undergo additional processing in Anchorage.
This year the Alaska Railroad is celebrating 100 years of transportation people and cargo around Alaska. While the railroad is one of the states oldest transporters, it certainly isn’t the only one, and in this issue of Alaska Business we also check in on the Marine Highway, Span Alaska, and the White Pass & Yukon Route. For those interested in Southeast, our focus on that region provides updates on Kensington Mine, Tongass FCU, the troll fishery, and Juneau’s growing landfill.